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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol. 2, No. 107 Part I, 5 June 1998


___________________________________________________________
RFE/RL NEWSLINE Vol. 2, No. 107 Part I, 5 June 1998

A daily report of developments in Eastern and Southeastern
Europe, Russia, the Caucasus and Central Asia prepared by
the staff of Radio Free Europe/Radio Liberty.

This is Part I, a compilation of news concerning Russia,
Transcaucasia and Central Asia. Part II covers Central,
Eastern, and Southeastern Europe and is distributed
simultaneously as a second document. Back issues of RFE/RL
Newsline and the OMRI Daily Digest are online at RFE/RL's
Web site: http://www.rferl.org/newsline

xxxxxxxxxxxxxxxxxxx SPECIAL REPORT xxxxxxxxxxxxxxxxxxxxxx
RUSSIAN MEDIA EMPIRES III
A new prime minister has taken office, Boris Berezovsky's
now a CIS official, and the state plans to form a new media
holding company. See our updated media report.
http://www.rferl.org/nca/special/rumedia3/index.html
(English)
http://www.rferl.org/bd/ru/russian/content/reports/rumedia3/
index.html
(Russian)

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Headlines, Part I

* YELTSIN CALLS FOR STRICT TAX DISCIPLINE

* KIRIENKO GETS SUPPORT, NOT AID IN PARIS

* ABKHAZ TALKS CONTINUE

End Note: LITTLE SIGN OF BALANCE-OF-PAYMENTS CRISIS IN
TURKMENISTAN
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RUSSIA

YELTSIN CALLS FOR STRICT TAX DISCIPLINE. In his weekly radio
address, Russian President Boris Yeltsin said on 5 June that
the crisis on Russia's financial markets has been "defused"
but that the government and Central Bank must continue to
take measures to preclude further destabilization, Russian
agencies reported. Yeltsin said that federal, regional, and
local governments must learn to live within their means, use
budget funds rationally, and stop accumulating debts. He
warned that tax policy "must become as tough as possible"
and that tax-evaders will be prosecuted, noting that failure
to collect taxes means that public sector wages cannot be
paid. LF

RUSSIAN MARKETS STABILIZE. After two days of rebounding from
the earlier sell-off, the main Russian stock market index
closed down 0.22 percent on 4 June, Russian agencies
reported. Shares in Gazprom lead the market, rising 13.7
percent after climbing 20.2 percent the day before. The
ruble also fell slightly against the dollar from 6.16 to
6.17. On 5 June, the Central Bank reduced its refinancing
rate from 150 percent to 60 percent. PG

NEMTSOV, URINSON DIFFER OVER CAUSES OF FINANCIAL CRISIS. In
an interview with the 4 June "Kommersant-Daily," First
Deputy Prime Minister Boris Nemtsov argued that the
financial crisis of the previous week was "prompted by the
budget deficit." He added that the government's attempt to
reduce expenditures and increase revenues should have been
made two years ago. Nemtsov excluded the possibility of the
government raising loans from Russia's oligarchs rather than
seeking them abroad, saying that the Russian business
tycoons "do not have that much money, they simply act like
they do." But Finance Minister Yakov Urinson offered a
different explanation for the crisis in an interview with
"Noviye izvestiya" published the same day. Urinson said the
crisis was the combined result of several adverse trends,
including the government crisis, the coal miners' strikes,
the southeast Asian economic crisis, a weak export
structure, and lack of confidence among foreign investors.
LF

KIRIENKO GETS SUPPORT, NOT AID IN PARIS. Russian Prime
Minister Sergei Kirienko won support from the French
government for his reform program but said he has not asked
for or received any additional aid, Interfax reported on 4
June. Kirienko said the situation in Russia is stabilizing
"smoothly and reliably" and that Moscow does not need any
financial assistance. Following two days in Paris, Kirienko
departed for Crimea to participate in a summit of Black Sea
states. PG

PRIMAKOV PRAISES UN SECURITY COUNCIL POSITION ON INDIA,
PAKISTAN. Foreign Minister Yevgenii Primakov on 4 June said
that the "joint stance" of the five permanent members of the
UN Security Council on recent nuclear tests by India and
Pakistan represents a major achievement, ITAR-TASS reported.
Primakov's comments came immediately before the five's
foreign ministers were to meet in Geneva on this issue. Also
on 4 June, Russia pledged to provide the International
Atomic Energy Agency with more information on Russian
nuclear plants that export to non-nuclear countries,
Interfax reported. PG

DUMA POSTPONES START II HEARINGS. After voting down a move
to cancel hearings on the arms control accord, the State
Duma agreed on 4 June to postpone them from 9 June to 16
June in order to meet with senior military and Foreign
Ministry officials who will be out of town on the earlier
date, ITAR-TASS reported. Duma speaker Gennadii Seleznev
warned that the hearings could still be canceled if U.S.
President Clinton continues to demand that Russia ratify the
treaty as a precondition for his visit to Moscow. PG

YELTSIN VETOES LAND CODE. President Yeltsin on 4 June vetoed
a land code passed by the Duma that would have made most
private real estates deals illegal, Interfax reported. He
said that its provision violates the constitution. In a
related move, the government on 4 June asked the
Constitutional Court to nullify a Duma bill that would
prevent foreigners from owning more than 25 percent of power
companies in Russia. This step came even as some Duma
members indicated that they are willing to consider
eliminating the 25 percent restriction from the legislation.
PG

YELTSIN WANTS "MORE BALANCED" PRESS COVERAGE. Presidential
spokesman Sergei Yastrzhembskii has said that Yeltsin wants
"more balanced" coverage of developments in Russia but that
he is not opposed to "freedom of expression," including
criticism of himself, ITAR-TASS reported on 4 June. "There
are invisible threads between the president and the mass
media, a very reliable umbilical cord," Yastrzhembskii
added. Meanwhile, at a conference devoted to the creation of
a state transmission monopoly, Mikhail Seslavinskii, the
chairman of the Russian television and radio broadcasting
service, said "the state has the right for information flows
as powerful as private corporations have." And Russian
Deputy Prime Minister Oleg Sysuev said the government wants
a structure that would allow the state to compete
successfully on the information market. However, Kemerovo
governor Aman Tuleev released a statement saying he will
challenge those plans in court. PG

NEW TAX CHIEF PROMISES TO TARGET 1,000 RICH RUSSIANS. In a
bid to persuade ordinary people to pay their taxes, Russia's
new tax chief Boris Fyodorov released a statement on 4 June
saying his service will target 1,000 prominent Russians for
special audits, Russian agencies reported. In a related
development, Prime Minister Kirienko said in Paris on 4 June
that he expects the Duma to give preliminary approval to a
new tax code before taking its summer recess. But he also
stressed that taxes would be determined until that time by
presidential decrees, ITAR-TASS reported. PG

LUKOIL OPPOSES OPEC MEMBERSHIP UNLESS OTHERS JOIN. Leonid
Fedun, LUKoil's vice president, told Interfax on 4 June that
Russia should not join OPEC unless Kazakhstan, Azerbaijan,
and Turkmenistan become members at the same time. He
explained that those countries "will take over the markets
we may leave" if Russia were forced to cut its exports to
conform to OPEC limits. PG

RUSSIA, JAPAN EXPAND MILITARY TIES. Kadzuya Natsukawa, the
chairman of Japan's joint Chiefs of Staff, told ITAR-TASS on
4 June that Moscow and Tokyo are expanding military
cooperation in order to improve security in the Asia-Pacific
region. But he added that Japan currently has no plans to
buy any of Russia's Su-27 combat planes. In another military
development, Russia on 4 June conducted its first-ever joint
exercise with the British Navy in the Baltic Sea. PG

AFGHANISTAN FIGHTING WORRIES MOSCOW. The Russian Foreign
Ministry on 4 June expressed concern about renewed fighting
in Afghanistan, Interfax reported. But the same day, Foreign
Ministry deputy spokesman Valerii Nesterushkin said Moscow
is pleased by Tajikistan's decision to establish a
commission including representatives of the government, the
parliament, and the opposition to work out a law on
political parties. PG

ASEAN CHIEF PRAISES RUSSIA. Secretary-General of the
Association of South East Asian Nations (ASEAN) Rodolfo
Severino praised Russia on 4 June for its role in the
organization, saying "thanks to Russia a certain balance of
forces has been created in the Asian Pacific region," ITAR-
TASS reported. Severino's comments were made one day after
ASEAN held its first conference in Moscow, which addressed,
among other issues, the southeast Asian financial crisis and
nuclear testing by Pakistan and India (India and Russia are
two of the "dialogue partners" of the nine-member
association). ASEAN is to ask the five recognized nuclear
states to persuade Pakistan and India to sign the Non-
Proliferation Treaty. ITAR-TASS on 3 June quoted Russian
Deputy Foreign Minister Grigorii Karasin as describing ASEAN
as a "major pole in an emerging multi-polar world." BP

NEW HUMAN RIGHTS MONITOR SAYS SITUATION IN RUSSIA 'AWFUL.'
Oleg Mironov, the newly appointed human rights commissioner,
told a press conference in Moscow on 4 June that Russia's
human rights record is currently "awful," Western agencies
reported. He noted that he will not push for an early ban on
executions, despite Moscow's commitments. (Russian Prime
Minister Kirienko issued a similar statement in Paris.)
Mironov also complained that his predecessor, Sergei
Kovalev, had left him with "no office, no personnel, and no
documents." As a result, Mironov concluded , he will have to
start work "from scratch." PG

GOVERNMENT FIRM TO MANAGE FEDERAL PROPERTY ABROAD. In a bid
to improve revenues from Russian property held abroad, the
Russian government has decided to create a state-owned firm
to manage such holdings, Interfax reported on 4 June.
According to the State Property Ministry, Russia currently
has more than 2,500 pieces of real estate in some 120
countries, not all of which are being actively used. PG

NO REHABILITATION FOR YEZHOV, FRINOVSKII. The Military
Collegium of the Russian Supreme Court on 4 June refused to
rehabilitate two Stalin-era secret police officials,
People's Commissar for Internal Affairs Nikolai Yezhov and
his deputy, Mikhail Frinovskii, Interfax reported. Both men,
executed in 1940, were notorious for their role in Stalin's
purges and show trials. PG

LUZHKOV SAYS MUSCOVITES DRINK TOO MUCH WATER. Moscow Mayor
Yurii Luzhkov told Interfax on 4 June that the water supply
in Moscow now conforms to "European and world standards."
But he complained that residents are drinking too much of
it, nearly twice as much as the per capita norm in European
cities. That amount, he said, represents "an unaffordable
luxury." Meanwhile, Chairman of the State Committee for
Ecology Viktor Danilov-Danelian told Interfax that Moscow is
one of 80 Russian cities that are environmentally unsafe. PG

KEMEROVO GOVERNOR DISPUTES MOSCOW KEEPING ITS PROMISES. Aman
Tuleev told Radio Mayak on 4 June that Moscow is not keeping
its promises to pay back wages to the Kuzbass coal miners,
ITAR-TASS reported. But the Russian news agency reported
that some 100 million rubles ($16.2 million) has been
dispatched to that region over the past 10 days. Tuleev also
announced plans to institute criminal proceedings against 50
local officials who, he said, were responsible for failing
to pay local workers in the past. PG

U.S. SHUTTLE DOCKS WITH 'MIR.' "Discovery" docked with the
"Mir" space station on 4 June in what is the last time that
a U.S. shuttle will dock with the station. "Mir' is
scheduled to be closed down early next year. The orientation
system aboard "Mir" began functioning fully again on 1 June,
after a computer problem had left the station drifting and
jeopardized the docking with "Discovery." U.S. astronaut
Andrew Thomas will return to Earth aboard the shuttle after
more than four months on "Mir." Once undocked, the Discovery
will travel alongside Mir to help locate a puncture in one
of the station's Spektr modules. The puncture occurred last
June when a cargo ship rammed into the station. BP

TRANSCAUCASUS AND CENTRAL ASIA

ABKHAZ TALKS CONTINUE. CIS Executive Secretary Boris
Berezovskii returned from Tbilisi to Abkhazia for a second
round of talks with Abkhaz President Vladislav Ardzinba in
Gagra on 4 June, Russian agencies reported. Ardzinba told
journalists that significant progress was made in preparing
for a meeting between himself and Georgian President Eduard
Shevardnadze, adding that "appropriate documents" will be
drafted within the next few days. In Moscow, the head of the
Russian Foreign Ministry task force that is mediating a
settlement of the Abkhaz conflict said talks between the
Georgian and Abkhaz special envoys are also making progress.
But in Tbilisi, Georgian presidential adviser Levan
Aleksidze said the Russian Foreign Ministry's rejection of a
Bosnia-style peace enforcement operation in Abkhazia
violates the document on additional measures for resolving
the Abkhaz conflict adopted at the April CIS summit. LF

U.S. AGAIN VETOES OIL EXPORT PIPELINE VIA IRAN... Meeting
with President Heidar Aliev in Baku on 4 June, U.S. Special
Envoy to the Newly Independent States Stephen Sestanovich
said Washington supports a multi-variant approach to the
transportation of Caspian hydrocarbons to world markets,
Russian agencies reported. At the same time, he ruled out
routing any pipeline through Iran. U.S. Energy Secretary
Federico Pena, speaking at the "Crossroads of the World"
conference in Istanbul last week, fully endorsed the Baku-
Ceyhan route for the Main Export Pipeline and pledged to try
to secure U.S. funding for it. ANS-Press on 3 June quoted
Turkish Energy Secretary Cumhur Ersumer as affirming that
Turkey is ready to fund the Baku-Ceyhan project if
Azerbaijan drops its insistence on retaining the decisive
vote in managing the new pipeline company. LF

...WHILE BAKU CONSIDERS ALTERNATIVES. Speaking at a press
conference in Baku pegged to the Fifth Caspian Oil and Gas
Exhibition, Natik Aliev, the president of Azerbaijan's state
oil company SOCAR, said Baku is currently assessing 11
export pipeline routes. He described the Iranian route as
economically attractive but said that export via Bulgaria
and Greece to the Mediterranean is also an option. Aliev
added that, in view of its superior quality, Azerbaijani oil
could be refined in Ukraine, Bulgaria, and Romania.
"Nezavisimaya gazeta" on 4 June reported that SOCAR and the
Russian pipeline concern Transneft have concluded an
agreement on the export of 9-10 million metric tons of
Azerbaijani oil from Baku to Novorossiisk when the current
export agreement expires in 2001. LF

EVACUATION OF BARSKOON BEGINS. Kyrgyz Deputy Prime Minister
Boris Silayev on 4 June announced that 3,500 residents of
the Barskoon area on the southern shore of Lake Issyk-Kul
will be evacuated to the northern shore, RFE/RL
correspondents reported. The village of Barskoon is located
near the scene of the 20 May spill of sodium cyanide into
the Barskoon River. More than 1,000 people received medical
attention in the week following the spill, and one woman
died from cyanide poisoning. Residents of the southern shore
are demanding the Kumtor gold mining operation, which is
responsible for the spill, be shut down. Concerns have also
been raised about the storage of 2,000 tons of sodium
cyanide in the town of Balykchy, on the western shore of
Issyk-Kul. Despite mounting evidence of a major
environmental disaster, government officials continue to say
it is safe to swim in the lake. BP

AKAYEV FAVORS ELECTORAL REFORM. Kyrgyz President Askar
Akayev, addressing a 4 June conference on "Improving the
Election System in Kyrgyzstan," said he wants to abolish the
requirement of at least 50 percent turnout for an election
to be valid, Interfax reported. Akayev said the cost of
holding run-off elections is too high and that he favors
"winner-takes-all" elections. An amendment has been drafted
and is expected to be submitted to the parliament later this
year. BP

REGIONAL AFFAIRS

BLACK SEA ECONOMIC COOPERATION FORUM CONVENES IN YALTA. At a
forum of the Black Sea Economic Cooperation (BSEC)
organization in Yalta on 5 June, the BSEC leaders signed a
joint declaration and a charter proclaiming the BSEC a
regional economic organization, ITAR-TASS reported.
Ukrainian President Leonid Kuchma said in his opening speech
that "the BSEC is transforming into a major component of
Europe's new security system." He added that Ukraine is in
favor of creating a BSEC free-trade zone. The forum is
attended by the presidents of Albania, Armenia, Azerbaijan,
Bulgaria, Georgia, Moldova, Romania, Turkey, and Ukraine as
well as the prime ministers of Greece and Russia. JM

BEREZOVSKII DENIES PLANS TO MOVE CIS HQ. CIS Executive
Secretary Boris Berezovskii told journalists on 4 June that
allegations that he plans to transfer CIS headquarters from
Minsk to Moscow are untrue, Interfax reported. Belarusian
envoy to the CIS Sergei Posokhov had claimed on 3 June that
Berezovskii and his staff had made preparations for such a
move. Posokhov had expressed Belarus's strong opposition to
such an intention. He added that Ukraine, Uzbekistan,
Armenia, and Tajikistan had similarly expressed objections
to that intention. LF

END NOTE

LITTLE SIGN OF BALANCE-OF-PAYMENTS CRISIS IN TURKMENISTAN

by Michael Wyzan

	Turkmenistan's GDP and exports are dominated by gas and
cotton. Its largely unreformed economy has been more affected
by developments on these markets than by the trends that
usually characterize transition economies.
	The lack of reform extends to the statistical
authorities. The country publishes less economic data than
any other CIS member. Even now, the CIS's Interstate
Statistical Committee still has virtually no 1997 figures on
Turkmenistan. That makes it difficult to figure out from
abroad what is happening there; visiting the country is not
particularly helpful either in identifying macroeconomic
trends, as the author learned in April.
	What data are available show GDP falling by about 25
percent in 1997. Turkmenistan should also should be
experiencing a balance-of-payments crisis, having run up an
approximately $250 million trade deficit and $600 million
current account deficit last year (an enormous 32 percent of
GDP) following many years of surpluses on both accounts.
While imports contracted last year by about 50 percent to
some $1 billion, exports fell by more than 55 percent to
around $750 million.
	However, there is little indication so far of any
crisis. Construction continues day and night on a number of
large infrastructure or "prestige" projects, such as a
congress hall and an arch commemorating the country's
neutrality. All such construction is carried out by foreign
contractors, who must be paid in foreign currency, and makes
uses of imported machinery. For a city with some 400,000
inhabitants, Ashgabat has an unusually large number of
hotels, with restaurants serving imported food.
	Most important, Turkmenistan has yet to agree to a
reform program with the IMF, making it one of only two post-
communist countries never to have done so (the other being
Yugoslavia). Thus, there has been no lending from the IMF to
support the balance of payments. Moreover, the absence of an
IMF program means that the World Bank is unable to lend the
country more than $100 million.
	Despite the collapse in exports and GDP, certain other
macroeconomic indicators were favorable in 1997: consumer
price inflation (December-to-December) fell to 21 percent
from 446 percent in 1996. The parallel market exchange rate
(Turkmenistan maintained a multiple exchange rate system
until April) was stable, while monetary policy was tight and
the budget essentially balanced.
	The large decline last year in GDP resulted chiefly from
a collapse in gas exports. During the Soviet era,
Turkmenistan exported about 70 billion cubic meters of gas
annually; by 1997, this figure had fallen to 6.5 billion,
down by 70 percent from 1996. Gas export revenues fell from
$674 million in 1996 to $274 million last year.
	The reason for last year's decline is clear: in March
1997, the government halted gas exports to its CIS partners--
namely, Armenia, Georgia, and Ukraine--because these
countries had built up large arrears to it for earlier
deliveries.
	The larger, longer-term decline set in 1994, when a
dispute with Gazprom resulted in the company's refusal to
allow Turkmen gas into its pipeline for sale to European
customers. The issues in dispute largely concern the price of
the gas and the share of the payment that is to be made in
currency (rather than by barter).
	In any case, since a large amount of gas has not been
paid for, the positive entry in the current account under gas
exports has had to be netted out in the capital account. Last
year, both the positive and negative entries fell, which
meant that the decline in gas exports had a smaller impact on
the balance of payments than would normally be the case.
	Cotton production rose last year to 630 million tons,
from 436 million tons in 1996, although it remains far below
the Soviet-era peak of 1.4 billion tons. Even with the
increase in production, however, cotton exports fell last
year, when the harvest remained unsold due to a price
disagreement with Turkish and Pakistani buyers.
	Another factor restraining imports is the authorities'
use of administrative methods to achieve precisely that end.
Access to foreign exchange is severely restricted, with most
such currency made available through auctions. And those
wishing to import consumer goods are not ordinarily allowed
to participate in those sales.
	Finally, Turkmenistan has weathered its balance-of-
payments problems partly because it has unusually large
foreign reserves, amounting to almost $1 billion at the end
of 1997. This is equivalent to 15 months of imports, easily
the highest such figure in the CIS. These reserves even grew
slightly in 1997.
	Much of the reserves are directly under the president's
control. If, as feared, the country registers another $500-
600 million current account deficit this year, maintaining
macroeconomic stability will depend on whether the president
decides to release some of "his" reserves. This is a matter
about which observers can only speculate.

The author is an economist living in Austria.

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